"Motivating our dealers is the key to our success." These
words from the company president changed the entire tone of the sales meeting.
Talk of cutting back or eliminating the company’s dealer incentive programs was
immediately shelved in favor of ideas on how to use such initiatives to help the
company grow. The president had been through these down business cycles
before and knew that eliminating the programs would hurt far more than it would
help. Organizations that discontinued or severely trimmed their dealer and
distributor programs more often than not failed to regain those relationships.
By keeping its incentive programs intact, the company was sending a clear
message that it recognized and valued its dealers' time and attention.

It takes a lot to make a business successful. But when it comes to
getting your product to end users, no one is more important to a company than
its dealers and distributors. Think of these key players as the oil in the
engine-without them, your business simply won't run. While recognizing and
motivating dealers is key in good times, it is of paramount importance in down
cycles. You need to keep your sales and marketing efforts rolling, or you might
as well close your doors. One of the most cost-efficient and effective
methods for keeping distributors focused on your products are sales incentives.
A well-planned and orchestrated program motivates your dealer network with
awards that recognize their excellent customer service, clever marketing and
outstanding sales performance. Incentive programs help convince brokers that
your products are worth their time and energy. They prove that you're serious
and aggressive about your sales and marketing efforts. While other companies may
be retrenching, your company has a prime opportunity to expand its market share.
Incentive programs are one of the best ways to establish strong
relationships throughout your distribution network. Also these efforts can flesh
out the dealers who believe in your products and are eager to work with you.
Perhaps the greatest advantage of running a dealer incentive is that it pays
for itself. The resulting sales gains will more than offset your costs. This
booklet provides a clear understanding of how a dealer incentive works and
offers suggestions on improving existing programs.

TARGET YOUR AUDIENCE

Anyone who is involved in the distribution and delivery of your product
is a perfect candidate for an incentive program. Hence, smart organizations
often run multiple programs simultaneously. They may also choose to create a
multi-tiered incentive that includes everyone-distributors, jobbers, wholesalers
and resellers. When creating and updating the database on your participants,
make sure to note demographic information such as age, marital status and gender
as well as any data on personal interests. It's helpful to separate the
information by region since dealers and distributors usually operate within a
specific area. Ideally, set up a small rotating advisory group of
participants to work with the program's architects. This will cut down on
problems later on. Interact with your biggest producers on a regular basis, but
also be sure to keep an ear open to your entire audience. Conduct your
research as carefully and as thoroughly as you would for a program targeting
your customers. In many respects, dealers and distributors are your most
important customers.

DEVELOP A STRATEGY

Increasing sales is the
ultimate goal of every dealer program. Of course, getting there is the tough
part. Your objectives must clarify exactly what you want your incentive
program to accomplish, as well as how you plan to do it. Your goals should be:

Simple and specific Steer away from broad terms such as "increase
sales. "Rather state, "increase sales of software 10 percent between March and
June:'

Realistic Have an ambitious agenda, but compare your goals to
past history. If your company has never come close to its objective, make sure
you can support why this time will be different. Keep in mind that programs
aimed at increasing sales during a slow period won't come close to peak-period
numbers.

Measurable If you can't gauge sales performance in specific
terms, it will be difficult to prove the program was a success. Also, you need
to be able to compare the program against past and future initiatives.

Well-timed Programs should be run when they will do the most good.
Also, adjust your objectiyes to suit fluctuations in the business cycle. The
objectives will influence the program's structure and rules. Dealers who have
participated and won awards for several consecutive years will expect rules
consistent with previous campaigns. If you're trying something different
that may eliminate some of these people from the winners' circle, you have two
options. You can either have a good reason ready that will convince them to
participate, or expect a few to walk away from your program. Of the two
program structures closed- and open-ended-each has its pros and cons. A fixed
budget caps the total number of winners. However, they tend to recognize the
people who probably would have performed well anyway. Close-ended programs work
best for groups of top performers with fairly equal track records. An
open-ended design doesn't put any limit on the number of winners. Dealers tend
to respond better to this design. Unlike internal salespeople, distributors can
choose whether to participate. If they don't like the odds of winning, they will
ignore your program and probably your product. Tiered incentive programs
work especially well with dealers and distributors because they allow
administrators to cast a wider net. Also they make it easier to group dealers
and distributors by region and performance levels to ensure a competitive
balance. For instance, an insurance company introduced a merchandise catalog
with several levels to reward its national network of independent brokers. The
opportunity to earn merchandise at several levels throughout the program kept
people selling, even when they knew they wouldn't qualify for the upper tier.
As you design your rules and structure, keep these issues in mind:

Give participants time to participate. Be wary of designs that ask
salespeople to cram their sales into a short period rather than promoting
consistent performance. Sink-or-swim selling isn't the best long-term strategy.
It is best to reward salespeople who can establish relationships with customers
and learn their needs.

Short-term, or spurt programs, work well as part
of a larger program. These shorter incentives allow administrators to react
to unexpected market changes or to push specific products. Consider mak

Tiered incentive programs make it easier to group dealers and
distributors by region and performance levels to ensure a competitive balance

ing sprint programs part of the beginning and end to ensure a fast start
as well as a strong finish. Don't become spurt happy, however. Participants
will catch on and may adjust their sales to take advantage of the shorter, more
lucrative sprints, instead of selling throughout a program.

Give
everyone a chance to win. The belief that 80 percent of your sales comes
from 20 percent of your people is more reality than myth. But what about the
remaining 20 percent of sales? Don't overlook the best and most promising of
your up-and-coming producers. Motivating this group can push your sales numbers
from good to great. Also, these are the top performers of tomorrow. An auto
manufacturer improved its sales nationwide because it reconfigured its dealer
program to do a better job of rewarding this group. Upon analyzing the numbers,
management found the top people were giving all they had to the program; the
much-feared complacency had not set in among this group. However, the data also
indicated the best of the middle tier were actually bringing in a higher
percentage of new sales in comparison to the top producers. The middle group's
overall sales were lower, but they were doing a remarkable job of generating new
business. Yet the past program wasn't rewarding this middle tier for their
efforts. Also, consider giving distributors the support they need to run
their own campaigns. In addition to promotional materials, this may involve the
chance for them to earn extra awards to use to reward their own people.

Track everything. Throughout the program you should know which
dealers are selling which products and how much they are selling. You need this
information in order to plan effective spurt programs. Also, keep a close
eye on award redemptions. Don't be afraid to make changes to merchandise awards
in the middle of a program. But don't use a bulldozer when a hoe will do.
Sometimes a little tweaking is all that is necessary.

The Web provides
advantages. These days, most dealer incentive programs offer some online
component. Considering the geographic diversity of the audience and their ease
with computers, the web is a natural fit. The actual per-employee cost of
the awards should be the same for online programs as traditional plans. However,
online programs save planners money through lower labor and printing costs.
The Internet offers a near real-time environment that includes validation of
the salesperson's behavior, processing of the transaction, account statements
and award fulfillment. Using a customized Web site, participants can shop from
the online catalog and track the status of their awards. Also, they can monitor
how they or their team is doing overall. Such flexibility in awards is a
major reason for moving online. Employees have choice, and administrators can
see which items are popular thereby enabling them to make changes as needed.
The main knock against Web programs is they are considered too impersonal to
be the sole form of recognition. Most planners include a personal note or phone
call to the dealer to combat this problem. In addition to administration and
award redemption, the Web can help administrators achieve their business goals.
It has become an effective method to train scattered sales forces on new
products. Considering the technology available, some training programs resemble
the most advanced computer games. A telecommunications company used the
Internet to increase suggestions from its off-site repair network, believing
they were a good source for sales opportunities. The field staff would look for
holes in existing client systems or be alert regarding comments on the
competitors' products. Repair people received points for such leads and even
more points for tips that generated business.

PROMOTE YOUR PROGRAM

Planners have a lot of nightmare scenarios. But one of the worst is
having a great program that no one knows about. Since dealers can choose
from a multitude of programs, a strong promotional element to your incentive
campaign will help break through the clutter and grab their attention. You have
to get the word out and keep it going, so make communications a top priority.
Participants should be able to enroll and participate in several ways: mail,
Web, telephone and fax. People won't participate if it looks too complicated or
time consuming. All these options allow participants to communicate at their
comfort level. If your company has an in-house graphics department, get them
involved at the beginning. Also, experienced award manufacturers or distributors
should be able to offer their expertise. When planning your communication
campaign, consider the following:

Use teasers to drop a hint about the
coming program. Teasers are often accompanied by a gift related to the program's
theme or grand prize.

Design kickoff materials that
generate enthusiasm for the program. If time and budget constraints allow, stage
a live kickoff at your annual sales meeting or at a trade show that a majority
of your participants will attend.

Use promotional pieces during the
program every few weeks. Remember, a message has to be delivered several times
before it's completely absorbed. The more you reach out to people, the more
successful your program will be.

Distribute mailings to update
participants on their progress on a regular schedule. Email works especially
well for this purpose. Updates are a wonderful opportunity to get in front of
participants.

Along with the final standings mailer, send a
congratulatory note and a letter from the company president thanking the
distributors for their contribution.

BUILD THE BUDGET

The goal
is to strike a balance between an award large enough to be motivating and one
that fits your budget. A successful dealer program will pay for itself, but you
will still need to spend money up front for promotion, awards and
administration. There are a variety of ways to develop a budget. Some
planners allot per winner about four percent to seven percent of the base pay of
the average participant. Others prefer to figure five percent to 10 percent of
the value of the expected sales as the total cost of the program. In terms
of closed versus open programs, the fixed plan allows you to establish a firm
budget at the start and is easier to plan financially. One downside to
open-ended programs is they tend to generate higher administrative costs, and
the total price tag is unknown until the campaign has ended. However, if
designed correctly, extra sales generated will more than cover such costs.
Regardless of the method, the majority of your budget-about 70
percent-should be spent on awards. Promotion is next, claiming 15 percent to 20
percent. This figure is a bit higher for dealer programs in comparison to other
types of incentives because you have to work harder and spend more to get this
group's attention. Administration usually requires about 5 percent. The
remainder of your money goes toward training. This budget line is especially
important in dealer programs if you are launching a new product.

EVALUATE THE RESULTS

If you established concrete, measurable
goals and tracked your participants' behavior throughout the program, you'll
have no trouble seeing the results of their efforts. Detail what worked and what
didn't to help those who plan the next incentive. This important analysis will
help prove the success of the campaign and point out ways to refine future
projects. Ask the administrators if they encountered any problems and what
they thought worked particularly well. Be sure to explore all the intangible
aspects of the program. In particular, get their input regarding the objectives
of the program, training and ideas for future awards. If possible, speak
directly with recipients to learn what they thought about your dealer or
distributor program. If you think they would be more honest responding through
an anonymous survey, then make one available to them.

Q. The best
dealers ignore my products once they reach the top award level of the program.
Any suggestions?

A. Design the program so a participant is never done
with it. One option is to offer top brokers a chance to earn extra merchandise
in addition to the top-level awards. Since this will be a very small group, make
the rewards as personal as possible to increase their appeal.

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Q.
A lot of the participants are using my debit card program for groceries and
purchases under $100. Is this a problem?

A. The good news: These people
are reminded of your program on a regular basis. The bad news: Your program may
possess little to no trophy value. It is being lumped with salary and won't hold
their attention for very long. Change the design so distributors regularly
have the chance to earn a large lump sum, such as 500 points. Once they see the
higher level awards are within reach, they will start saving the points for
dream merchandise. Then your incentive will once again be an award program and
not a grocery subsidy.

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Q.
How often should I change merchandise awards?

A. It depends on your
program and participants. If you offer a lot of trendy items, be aware they may
not be so hot in a few months. Also, if your program attracts the same people,
more frequent updating is necessary. With ongoing incentives, such as a catalog
or debit-card program, new merchandise can generate renewed interest. When
trying to weed out less popular awards, be sure to compare merchandise that's on
the same level. Keep in mind that early in the program the top prizes may have
the lowest redemption rates simply because participants haven't had time to earn
them.